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Addressing Sales Practice and Conduct Risk in the Canadian Market

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Addressing Sales Practice and Conduct Risk in the Canadian Market

  1. 1. ADDRESSING SALES PRACTICE AND CONDUCT RISK IN THE CANADIAN MARKET
  2. 2. Copyright © 2018 Accenture. All rights reserved. 2 CANADIAN BANKING SALES PRACTICE AND CONDUCT RISK Canadian Banks are facing increased pressure to demonstrate appropriate conduct and adapt to increased regulation on suitability, fraud and investor protection activities. Implementing a sales practice & conduct control framework and embedding ethical values and customer centricity in a firm’s cultural DNA are critical to managing conduct risk and protecting a firm’s reputation. Does the Organizational Culture provide foundations for responsible growth? • Difficulty to articulate a strategic vision at a company level or to get the tone at the top for culture change • Lack of clarity around roles and responsibilities to effectively drive culture change • Insufficient mechanism to measure the level of culture adoption or to assess the effectiveness of projects in achieving adoption • Complexity to bring all business functions together into a cross-organizational effort that touches every part of the company • Need to navigate technology advances and proliferation of market solutions and address challenges of integrating solutions for data quality / standardization Change Complexity Key Challenges Do resources have the Skills and Capabilities to meet emerging challenges? Does the Sales Practices & Conduct Risk Framework effectively protect the firm? • Canadian banks are facing increased pressure from regulators (i.e. Office of the Superintendent of Financial Institutions (OSFI), Financial Consumer Agency of Canada) to demonstrate appropriate banking conduct • Shifts in customer interaction model and information requirements are adding additional complexity to manage • Years of low growth places focus on new product development and cross-selling – creating opportunities to exploit customers • Risk management demands a fundamentally different workforce – able to detect emerging risks before they impact customers and operations • Advances in technology, including workforce digitalization and process automation, leading to a re-focus on complex decision making and data analysis requires a retraining of resources • In an era of volatility, changing expectations and radical transparency, culture, ethics and conduct is a defining issue for corporate reputation and long-term sustainability • Banks should move beyond an approach governed by strict rules and regulations, to a culture that encourages employees to think ethically and take appropriate risk and accountability to foster responsible growth
  3. 3. Copyright © 2018 Accenture. All rights reserved. 3 REPUTATIONAL & CONDUCT RISK MATURITY SCALE Many firms continue to struggle with the prospect of managing reputation risk or have yet to begin addressing the topic Does the Organizational Culture provide foundations for responsible growth?
  4. 4. Copyright © 2018 Accenture. All rights reserved. 4 BUILDING SUSTAINABLE ORGANIZATIONAL CULTURE In an era of volatility and radical transparency, organizational culture is becoming a defining issue for corporate reputation and long- term sustainability. An effective strategy for organizational culture can serve to mitigate risk, and function as a differentiator and driver of the organization’s objectives. Strong organizational culture is aligned to meet the demands of various stakeholder groups. 1 3 2 4 Risk-enabled decision making. Define processes and governance for making challenging decisions, allowing for intelligent risk-taking in the context of business goals and understanding of trade-offs. Shareholder expectations. Potentially reduce regulatory fines and increase ROE as culture of ethical conduct becomes normalized. Embedded compliance. Require role-based, annual training in key risk areas such as customer data security, and include risk management in performance management metrics. Systematic testing & reporting. Institutionalize conduct surveillance, scenario testing and reporting, allowing for ongoing benchmarking and compliance assessments. Business Alignment Regulatory Alignment Employee Alignment Customer Alignment Single view. Use analytics to understand and support customer needs – and products – in an integrated manner. Reinforce customer focus via product development & review process. Trust & reputation. Rebuild customer trust by admitting to past challenges, soliciting input from customers and defining the future state culture in terms of providing value to customers. Celebration of conduct identified. Encourage employees to identify positive & negative conduct, celebrating integrity and designating local conduct champions to cascade key messages. Attraction & retention. Recruit the right people from the beginning, who are attracted by the opportunity to work for a culture where conduct counts. Business ownership. Transfer conduct controls to the business for execution, with compliance providing oversight.
  5. 5. Copyright © 2018 Accenture. All rights reserved. 5 FROM UNDERSTANDING TO ACTION: ORGANIZATIONAL CULTURE Accenture believes that a deliberate and strategic approach to culture empowered by real-time analytics and organizational health benchmarks can serve as the foundation for long term sustainable growth. • A strategic approach to organizational culture and conduct can serve as foundation for a strong reputation and effective sustainability. • Establishing strong foundations depends first on understanding the organization’s current-state culture, benchmarked against leading research on the critical drivers of ethical behavior and decision making. • An independent conduct culture maturity assessment takes account of policies and procedures, the perspectives of senior leaders, performance compensation and other incentives, and the reality of day-to-day decision making as perceived by people across the organization in order to provide a robust, evidence-based foundation for change. • Applying tools and technology like Accenture’s Change Tracking and Ethics Analytics help remove the “black box” surrounding culture and allow organizations to measure and monitor culture results in real-time and perform targeted interventions to support an effective culture transformation journey. Engage senior leaders and identify key requirements Apply culture assessment surveys and maturity diagnostic Assess future state culture vision and set priority focus Design sustainable culture program Implement sustainable program and track success 1 2 3 4 5 Culture Assessment Future State Design Culture Transformation Conduct & Culture Assessment estimated at 6 weeks Future State Vision & Sustainable Program Design estimated at 6 weeks Delivery & Implementation estimated time TBD Organizational Culture as Foundation for Sustainability Illustrative Approach
  6. 6. Copyright © 2018 Accenture. All rights reserved. 6 REPUTATIONAL & CONDUCT RISK MATURITY SCALE Many firms continue to struggle with the prospect of managing reputation risk or have yet to begin addressing the topic Do resources have the Skills and Capabilities to meet emerging challenges?
  7. 7. Copyright © 2018 Accenture. All rights reserved. 7 REQUIRED RISK MANAGEMENT SKILLS AND CAPABILITIES Risk management staff touches on areas such as operational task processing, compliance, complex decision making and analysis, and technology / data management. This demands a fundamentally direct workforce with a focus on talent reskilling and recruiting. Advisory 2020 GRC Organization Roles Financial Crime Compliance Continuous Monitoring and Investigations Risk and Controls Employee Compliance Model Management and Tuning Implications of Required Skillset for the 2020 Workforce • Increased workforce digitalization and process automation and the creation of centers of excellence to transition Governance, Risk & Compliance (GRC) staff from “General Risk Managers” to “Deep Subject Matter Advisors” (SMA) that focus on solving complex problems • GRC professionals will be able to refine specialisms (Product, Business, Regulation) through dedicated career paths to provide more effective 1st line of defense (LoD) oversight and advisory support • As SMAs, GRC Officers will be expected to do more than execute operational tasks based on information provided and should operate to both the spirit and letter of the law, asking deeper questions to understand context, behaviors and culture • Staff should be savvy in leveraging the latest technology innovations for which continuous training should be required • While new technology may help alleviate skill shortages in selected areas (such as Data Quality review / remediation), generally, investments are expected to re-skill / recruit employees to best deliver in new specialized advisory-focused roles through venues such as Accenture’s Fordham University Alliance Focus and Proficiency Communications Business Acumen Legal Skills Analytics Tech. Acumen Perf. Monitoring Control Oversight
  8. 8. Copyright © 2018 Accenture. All rights reserved. 8 Does the Sales Practices and Conduct Risk Framework effectively protect the firm?
  9. 9. Copyright © 2018 Accenture. All rights reserved. 9 THE LINK BETWEEN REPUTATION AND CONDUCT Conduct is not something firms can ignore if they want to build and protect a strong firm reputation.1 According to a survey by the Reputation Institute, two of the top three drivers of how a firm is perceived in the market are directly related to conduct and behavior. 1.Source: 2018 Global RepTrak® 100, Reputation Institute, March 15, 2018. Access at: https://www.reputationinstitute.com/resources/pdf/2018-global-reptrak Includes: Adapting quickly to change, being first to market with new products / services and being innovative INNOVATION Includes: Having strong prospects, being profitable and exceeding financial expectations PERFORMANCE Includes: Being well organized, being excellent managers, having a strong and appealing leader, having a clear vision for the future LEADERSHIP Includes: Rewarding employees fairly, being concerned for employees’ well-being and offering an equal opportunity workplace WORKPLACE Includes: Having high quality products / services, standing behind products / services, having good value products / services and meeting customer needs Product / Services1 Includes: Being open and transparent, ethical and fair in doing business Governance2 Includes: Having a positive influence on society, being environmentally conscious and supporting good causes Citizenship3 Feeling Trust Admire Governance Esteem 12.9% 21.6% 12.5% 14.1% 15.0% 10.8% 13.1% Drivers of Reputation 2 of the top 3 drivers are directly related to conduct and behavior Methods of Re-Enforcement Change of Culture Re-Prioritization of Risk Appetite Implementation of Control Framework Implementation of Risk Management Framework
  10. 10. Copyright © 2018 Accenture. All rights reserved. 10 MANAGING INCREASED REGULATORY SCRUTINY In response to banking misconduct allegations at the major Canadian financial institutions in 2017, the Canadian regulators have sharpened their focus on conduct culture, sales practices and product suitability governance, and how banks manage reputational risks. We anticipate that Canadian regulators will adopt many of the US and UK conduct regulations and guidelines. Canadian banks should look closely at the conduct journey in the US and the UK where the conduct agenda has matured as a concept. We anticipate that Canadian regulators will adopt many of the US and UK conduct regulations and guidelines. Learning from the US & UK Experience: Increased regulatory focus on product / service suitability, delivering customer-centric outcomes, as well as monitoring employee behavior and organizational culture. Renewed focus on identifying and managing conflicts of interest and maintaining proper risk management and control safeguards developed to protect and reinforce a firm’s culture. Increased scrutiny on conflicts caused by improper sales target and performance incentives with a focus on personal accountability through introduction of clawbacks, forfeiture and other mechanisms. Note: Illustrative list of US and UK examples. • OSC has published the Business Conduct Requirements for registered firms covering topics such as know your client (KYC) and suitability, marketing, client disclosures, complaint handling, and oversight of service providers • The OSC’s Whistleblower Program is the only Canadian program that offers financial awards for tips that lead to successful enforcement actions. As a part of the OSC's whistleblower policy, the regulator added to its securities regulations anti-retaliation protections for whistleblowers • FCAC conducting industry reviews on Consumer Protection related policies, procedures and practices and is expected to increase enforcement actions for customer-centric outcomes • FCAC has placed increased scrutiny on disclosures and processes for obtaining Customer Consent for New Products or Services and the new B-5 Consent rule outlines guidelines for making any customer communication (verbal, written, or electronic) clear, simple and not misleading • OSFI reviewing the domestic Retail Sales Practices at domestic systematically important banks with a focus on risk culture, sales practices and suitability governance and controls, and managing reputational risks • Continued scrutiny on Performance Management and Compensation Practices as part of OSFI’s broader probe of the components of culture and risk following banking misconduct allegations • OSFI also focusing on Public Disclosure and Transparency regimes that will exert market discipline and reinforce internal risk culture with external vigilance OSFI FCAC Ontario Securities Commission (OSC) Financial Conduct Authority Office of the Comptroller of the Currency FINRA Accenture analysis based upon publicly available information.
  11. 11. Copyright © 2018 Accenture. All rights reserved. 11 REPUTATIONAL AND CONDUCT RISK FRAMEWORK Accenture believes that protecting a firm’s ethical health and reputation requires a strong Reputational and Conduct Risk Program with support from all areas of the bank, including executive leadership. The effort should also provide employees with the proper tools to allow continuous improvement through monitoring and analysis. Key ConsiderationsDetect Prevent Deter Monitor Understand Conduct Risk Control Framework Foundational Elements Business Model, Strategy & Governance Roles & Accountabilities Defined Policies & Procedures Regulatory Compliance Organizational Behavior, Conduct Culture and People Management Defined Value Structure Compensation & Incentive Structure Performance Management Embedded Conduct Culture Talent Management Hiring / Staffing Training & Communications Reinforcement Product Design, Marketing and Sales Controls Financial Product Design Marketing Review Product Suitability Sales Controls Escalations Customer Complaints Whistleblowing Programs Data, Monitoring and Analysis Data Management Key Metrics MI / Reporting Tools & Technology Sources of Reputation Degradation Business Misconduct Internet Social Media Regulator Scrutiny Employee Misconduct Operational Incidents & Events Protect Against • Strong and visible leadership commitment required for an effective Conduct & Culture change program • Firms should be prepared to make operating model changes to be customer-centric and maintain desired behaviors • Invest in Management Information (MI) / analytics tools to allow the business to build and test hypothesis for the purpose of uncovering emerging issues and root causes • End-to-end solutions can support conduct monitoring and production of MI, while using technology to provide reminders to help change staff and customer behavior • Invest in programs driving a strong culture; this starts with analyzing the firm’s current culture, performance incentives and controls in order to best determine how to drive change
  12. 12. Copyright © 2018 Accenture. All rights reserved. 12 INTEGRATED SURVEILLANCE MONITORING The industry is moving towards a more holistic monitoring approach to manage the dependencies between non-financial risk use cases and empowering risk governance. Accenture has helped clients apply an integrated surveillance approach to integrate an end-to-end workflow to collect data, distinguish the real cases, assign and monitor mitigating actions and provide dashboards / reports. Prioritization Protocol Issue Resolution Monitoring Assign Actions and Monitor Resolutions Multisource Alerts or Key Risk Indicators (KRIs) (non-exhaustive) Helps manage personal account data breaches, gifts & entertainment breaches, registration breaches and affiliation issues Provides oversight of communication patterns with wall crossed people, as well as social media activities Can monitor large unhedged derivative positions, scan for abnormal trading patterns and examine large P&L swings Helps reduce the risk of password sharing, monitors password denied patterns, and provides privileged access Key Performance Indicators (KPIs)can be generated on a client satisfaction index and help monitor complaints KPIs can be used to monitor increased volume of sales / spikes of dedicated products and closures Capital Requirements Regulation (CRR) findings and Regulatory findings can be monitored Provides oversight regarding conflicts of interests, restricted list violations, info barrier violations and information misuse Data can be leveraged to address AML issues, sanctions, corruption issues and ongoing iinvestigations Accenture provides in-depth advisory in sales violations, suitability issues, and complaints Advisory Areas Central Compliance E-Comm Surveillance Control Room / Conflicts Management Financial Crime Trade Surveillance CRR & Reg Reviews Information Risk Customer Complaints Activity Volumes Collect Data Identifies KRIs that are above thresholds / limits Identifies relevant alerts ! Sorts compliance findings by priority Prioritize Issues Use risk scorecards to prioritize Reporting Communicate Analytics Insights Predict Issues Suggest Resolution Actions Identify Patterns y1 x2x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x xx x x x x x x1 x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x3xx xx x x x Use predictive analytics to identify correlations, root causes between issues Use Machine Learning to learn from resolved actions and false positives to: • Auto adapt models for better prediction • Suggest potential actions Use advanced visualization to identify patterns Financial Crime Issues Non-Disciplinary Issues (systems, procedures, training, …) Disciplinary Issues (Investigation, revocation, etc..…) Closed cases (False Positive) Issues Action PlanAction PlanAction Plan Issues Action PlanAction PlanAction Plan Issues Action PlanAction PlanAction Plan Investigate and assign actions on relevant cases Insight / Prioritization Issues (risk weight & model review) Issues Action PlanAction PlanAction Plan Feedback loop Communicate and report on the various data available issues, risk, false positive, resolutions
  13. 13. Copyright © 2018 Accenture. All rights reserved. 13 INVESTMENT IN TOOLS AND TECHNOLOGY Most firms leverage multiple tools and products in their operational processes. End-to-end solutions can support conduct monitoring and production of MI, while utilizing technology to provide reminders to help change staff behavior. • It is unethical to only monitor inward facing fraud • A large portion of customers are unaware with the lack of fiduciary duty Data Detection Reporting • Accenture can help firms establish preferred practices within Data Management: – Data Governance – Data Quality – Big Data Strategies • There are both established and start up providers, as well as in-house built systems that provide detection solutions. • Accenture has relationships and experience with these solutions and can help evaluate, implement and improve these solutions • Establishing a reporting architecture based on critical information that is verified and reported in a timely manor is key to a surveillance program • Accenture can institute leading practices in surveillance management information and management reporting • Robust and adaptive investigations are critical to a surveillance program • Accenture can evaluate investigation practices to: – Establish robust analysis across discrete systems and data sets – Establish feed back and continual improvement processes – Reduce false alerts Surveillance Monitoring Investigation Tools and Vendors • NICE Actimize™ • Cafyne, Inc. • Nexidia Inc. • Verint Systems Inc • Attivio, Inc. • Fonetic Solutions S.L. • Actiance, Inc. • Neurensic™ • Bloomberg Vault ™ • SAS Institue Inc. • Catelas, Inc • ForcepointTM UEBA (formerly Red Owl) • SAP® BusinessObjects™ • TIBCO® Spotfire® • Qlikview® • Tableau®
  14. 14. Copyright © 2018 Accenture. All rights reserved. 14 Preparing for the Conduct Journey
  15. 15. Copyright © 2018 Accenture. All rights reserved. 15 WHOSE IS RESPONSIBLE FOR REPUTATIONAL AND CONDUCT RISK? Mitigating Conduct and Reputational risk is a cross-organizational effort, requiring support from all stakeholders, and necessitating close management of inter-dependencies across the lines of defense. This allows consistent delivery against roles and responsibilities and mission critical use cases. Operational Risk Internal Audit Finance Human Resources Compliance Vendor Risk Management Enterprise Data Office Product Control 3rd Line of Defense 2nd Line of Defense 1st Line of Defense Surveillance Tools Investigation & Reporting People Governance, Rules & Standards Our experience indicates that leading firms have defined a holistic reputational and conduct risk framework, with clearly defined leadership roles and accountabilities so as to closely manage the inter-dependencies and help protect the firm’s ethical health and reputation.
  16. 16. Copyright © 2018 Accenture. All rights reserved. 16 PREPARING FOR THE JOURNEY Industry responses vary according to three imperatives: response to Regulatory / Monitoring enquires (i.e. OSFI); remediation of prior misconduct; or ramping up for future steady-state compliance. Key Activities Set values and strategy Conduct risk assessment including product risk assessment Review business model, strategy and operating model to deliver good customer outcomes Develop ethical data policy, procedures and processes Develop customer communication process and procedures including review, approval and testing Define external complaint and internal whistleblowing case management procedures aligned to regulatory expectations Review governance structures and individual responsibilities Develop remuneration policy aligned with business risks and good customer outcomes Upgrade surveillance tools Develop conduct risk metrics (KPIs) as part of behavior report Cross firm training and communications Remediate marketing and sales practices Phase Principles and Strategy Diagnostics and Evidencing Analytics, Management Information, Reporting Process Monitoring and Surveillance Embedding Culture Change Regulatory and Legal Remediation Current progress North American banks Current progress UK banks
  17. 17. Copyright © 2018 Accenture. All rights reserved. 17 Accenture Experience and Accelerators
  18. 18. Copyright © 2018 Accenture. All rights reserved. 18 ACCENTURE FINANCE & RISK 600+ Financial services clients serviced globally Breadth and Depth of Experience to Meet Your Business Needs: We help the world’s banks, insurance, capital markets and FinTech firms meet unparalleled strategic, operational, technology and sourcing demands. Our goal is to be recognized as the premier innovation and execution partner in the Financial services industry, collaborating with client and eco- system alliances and partners to create sustainable value for them and our communities. We offer innovative solutions developed jointly with key alliances such as Microsoft Corporation, SAP SE, Oracle Corporation, Cisco Systems, Inc and Salesforce.com, Inc. US$34.9 billion In Annual Revenues (2017) 449,000 Employees 40+ Industries Served 98 of top 100 Clients have worked with Accenture for at least 10 years 120+ Clients served across the globe 150+ Powerful alliance network of market leaders and innovators FINANCE & RISK Serving leading financial services clients in nearly 50 countries 5,000+ Finance & Risk professionals across the globe Fortune Global 500 companies we work with include We help clients streamline operating models, integrate risk and finance functions, align and integrate disparate sources of data, innovate to manage risk and deliver technology solutions FINANCIAL SERVICESACCENTURE Cyber Risk & Resilience Finance & Accounting Sourcing & Procurement Regulatory & Compliance Financial Risk Management Finance & Risk Analytics Areas of Focus: 50,000+ Financial services professionals globally
  19. 19. Copyright © 2018 Accenture. All rights reserved. 19 CONDUCT RISK OFFERING OVERVIEW Accenture has outlined a set of conduct risk management services that can help financial institutions improve company culture, pre- empt regulatory censure or differentiate their customer proposition. Ethics, Conduct, and Culture Assessment Conduct Risk Management Program Culture Transformation and Remediation Conduct Surveillance, Reporting and Metrics Strategic and Reputational Risk Assessment Sales Practices and Suitability Framework Third-Party Conduct Program Organizational health check analysis and benchmarking against the conduct maturity model across the three lines of defense. Gap analysis, design, and implementation of Conduct Risk Management programs including understanding regulatory and non-regulatory requirements across business lines and control partners. Organizational and behavioral transformation across all three lines of defense aligning people, processes, and technology to the organization’s strategic objectives, values, mission, and target culture. Insights on breadth and depth of risks, root causes, acceptable measures, and risk event outcomes. Extensive KRI library and customizable analytics application for conduct reporting metrics. Firm level analysis to create an industry relative benchmark and help clients define a roadmap for their strategic and reputational risk management policies, procedures, and metrics going forward. Conduct independent review analyzing sales campaigns, performance metrics and drivers, governance structure and controls, and other related data to identify conduct related issues and recommend potential solutions. Governance model and assessment capabilities to measure, monitor, and engage on third-party conduct activities. • Organization wide health check (including survey) analysis • Risk data governance and security assessment • Assessment of the control environment for operating effectiveness • Ethics program designed in accordance with Federal Sentencing Guidelines • Dodd-Frank Act section 956 incentive structure review • Setting global standards and program support • Operating model design and alignment (policy and process design, whistleblowing) • Process and technology design and implementation for conduct management • Leadership conduct framework • Trust-based leadership development program including programs for designing and testing desired cultural changes • Remediation of past events (misselling, payment protection insurance, etc.) • Incentives training and tools for analysis, gamification and simulations • Employee engagement reimagination • Implementation of conduct MI application • KRI identification, definition, and prioritization • Conduct risk dashboard design and development • End-to-end surveillance (trading, e-comms, AML) – systems and data warehousing, algorithm development • Gap analysis for where existing KRIs should be enhanced and new ones developed • Strategic roadmap for protecting against future reputational risks • Assessment of banking sales metrics and performance drivers • Captive agency sales model, practices, and oversight design • Direct to customer insurance sales metrics and performance alignment • Service level agreement review and performance analytics • Vendor management systems assessment and reporting capabilities DESCRIPTIONTYPICALENGAGEMENTS
  20. 20. Copyright © 2018 Accenture. All rights reserved. 20 SAMPLE OF AN ACCELERATOR: CONDUCT CULTURE MATURITY MODEL Many firms have started to transform their culture by addressing regulatory requirements and updating their value statements, but the extent of change is hard to assess. Applying a firm’s practices to a maturity model permits a deeper understanding of how embedded the behaviors, policies and practices are within the DNA of the firm and its employees. 3 No. Elements of Model Spectrum Description 1 Customer Centricity To put the customer experience at the center of products and transactions, delivering the best possible experience and rebuilding consumer trust. 2 Product Governance To align product development and marketing processes with customer needs and to deliver true value for customers. 3 Compensation To incentivize, reward and recognize ethical conduct in the context of company performance. 4 Leadership To visibly set tone, messages and behaviors and guide transformation and operations. 5 Data Stewardship To both protect customer data and incentivize usage for customer- focused product development. 6 Values and Behaviors To uphold and demonstrate at all levels and for all roles the firm’s desired culture and ethics. 7 Communications To articulate what is, and is not appropriate conduct, risk-based decision making and progress made. 8 Training To reinforce new knowledge, change mindsets, and discourage risky behavior of staff. 9 Metrics To establish clear performance indicators and measure change required to transform. 2 Low Product Governance High Product Governance 1 3 4 Low Compensation High Compensation 1 2 4 3 Low Leadership Involvement High Leadership Involvement 1 2 4 2 Low Data Stewardship High Data Stewardship 1 3 4 2 Low Values and Behavior High Values and Behavior 1 3 4 3 Low Training High Training 1 2 4 2 Low Degree of Communications High Degree of Communications 1 3 4 Illustrative Low Customer Centricity High Customer Centricity 2 3 41 2 Low Metrics High Metrics 1 3 4
  21. 21. Copyright © 2018 Accenture. All rights reserved. 21 SAMPLE OF AN ACCELERATOR: SUSPECT BEHAVIOR DETECTOR SURVEILLANCE PLATFORM The Suspect Behavior Detector Surveillance Platform demonstrates the power of deploying big data, advanced analytics and interactive visualizations, leading to threat identification and prudent risk decision making. The tool deploys Surveillance Analytics, Social Network Analysis, and Deep Emotion / Sentiment Analysis in the detection of misconduct and behavioral risk in financial sector. Suspect Behavior Detector (SBD) Surveillance Platform Tracking Track risk and surveillance actions, converting insight into prudent risk decisioning Core Capabilities Integration Integrate multiple data sources to produce a holistic surveillance view Analytics Obtain insight into illicit behavior through communication surveillance and sentiment extraction Thought Leadership Embedded Accenture-Stevens co-developed advanced analytics AI assets and accelerators
  22. 22. Copyright © 2018 Accenture. All rights reserved. 22 SAMPLE OF AN ACCELERATOR: METRICS INVENTORY Experience in delivering MI solutions for operations and compliance risk management, and the emerging discipline of conduct / human risk has enabled Accenture to maintain a database of over 600 common metrics. Risk Category Example Metrics Data Deficiency in quality of data or how it is used Average time spent extracting and cleaning data vs. analysis People Violation of internal policies by employees or risks introduced by customers Personal trading instances (one time and repeat) without pre-clearance Process Deficiency in an existing procedure, or absence of a procedure Percent or number of accounts without proper due diligence (i.e. KYC, OFAC, etc.) System Breakdowns in existing systems or technology Costliness of making changes to existing systems Risk Category Example Metrics People Compliance issues and risks resulting from employee actions Issue type quarterly trend by product area Programs Metrics related to programs used to prevent compliance issues Total number of breaches of the firm’s Group AML Policy identified during the calendar month Risk / Controls How risks are handled via controls Percent of current open audit items owned by Compliance function and closed within the target timeframe Compliance Risk Metrics to support compliance risk management Operations Risk Metrics related to loss event management – how well / poorly losses are being managed or how much they may increase as the result of a changing risk metric Conduct / Human Risk Metrics to help quantify conduct risk across three dimensions, in line with emerging regulatory principles (e.g., Financial Conduct Authority) Dimension Examples Risk Pillars Key sub-components of conduct risk Customer and Care; Sales Process; Product Design; Misuse of Information; Insider Dealing; and Market Manipulation Business Type Type of business lines being operated Retail; Investment Banking; Mortgage Providers Client Type Type of client served Retail; Wholesale Reputational Risk Metrics to help quantify and gain awareness around reputational risk Risk Category Example Metrics People Employee conduct and customers’ perception of it Exec Compensation; Employee Compliance; Employee Behavior Customer Customer feedback and firm’s actions or inactions Product Complaints; Compromised Customer Credentials Regulatory Difficulty keeping pace with regulatory changes Number of regulatory events evaluated within target timeframe Business Conduct Increasing corporate social responsibilities Presence of social responsibility strategy approved at senior management level
  23. 23. Copyright © 2018 Accenture. All rights reserved. 23 EXAMPLES OF ACCENTURE THOUGHT LEADERSHIP Accenture has developed a number of thought leadership point of views and approaches specifically focused on managing reputational and conduct risk, assessing ethics and culture, and establishing surveillance and employee misconduct monitoring programs to support clients in their efforts to be leaders in their field. Protecting and Building Firm Reputation: Addressing the Conduct Challenge The Ethics and Conduct Challenge for US Banks: Learning from the UK Experience The Digital Emperor Wears No Clothes: Are Business Leaders Ready for a World of Radical Transparency? Getting Surveillance Right: Protecting Banks’ Reputation and Profitability Communications Surveillance: Identifying and Preventing Misconduct in Digital Communications
  24. 24. CONTACTS Samantha Regan Accenture Finance & Risk Managing Director, Global Regulatory and Compliance Lead samantha.regan@accenture.com Bailey Hansford Accenture Finance & Risk Senior Manager, NA Conduct Risk & Consumer Protection Lead bailey.hansford@accenture.com Usman Raj Accenture Finance & Risk Senior Manager, Canadian Risk and Compliance Lead usman.raj@accenture.com Dennis Chan Accenture Finance & Risk Consultant dennis.c.chan@accenture.com
  25. 25. ADDRESSING SALES PRACTICE AND CONDUCT RISK IN THE CANADIAN MARKET About Accenture Accenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialized skills across more than 40 industries and all business functions—underpinned by the world’s largest delivery network—Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders. With more than 449,000 people serving clients in more than 120 countries, Accenture drives innovation to improve the way the world works and lives. Visit us at www.accenture.com Accenture, its logo, and High Performance Delivered are trademarks of Accenture. Disclaimer This presentation is intended for general informational purposes only and does not take into account the reader’s specific circumstances, and may not reflect the most current developments. Accenture disclaims, to the fullest extent permitted by applicable law, any and all liability for the accuracy and completeness of the information in this presentation and for any acts or omissions made based on such information. Accenture does not provide legal, regulatory, audit, or tax advice. Readers are responsible for obtaining such advice from their own legal counsel or other licensed professionals. Copyright © 2018 Accenture. All rights reserved. 25

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